Tax Changes You Should Know About At this time of year there are two things that make everybody feel good: The fact that spring is just around the corner and saving money on taxes. This year there a few recently introduced tax credits and reductions you should know about so you can stride into spring with a few more dollars in your pocket. GST rate cut Since January 1, 2008, the Goods and Services Tax (GST) rate has been reduced from 6% to 5% and represents savings of $100 on a $10,000 purchase. Increase in the Basic Personal Amount This tax year, you will be able to claim a basic personal amount of $9,600 on your taxes - up from $8,929. That translates into an extra $671 of tax-free income on your tax return. The spousal or common-law partner amount has also been increased from $8,929 to $9,600. Lowest personal income tax rate reduced The lowest personal income tax rate has been reduced to 15% from 15.5%, retroactive to January 1, 2007. The combination of this reduction and the increase in the basic personal credit will result in savings of about $242 for a person earning $40,000 a year. Children’s fitness tax credit This new credit allows parents to claim a maximum of $500 per year for eligible activity fees paid for each child who is under 16 at any time during the year. The credit can be claimed when the fees are paid, not when the activity actually takes place - so you could prepay fees for a following year and still claim them in the current year. Child tax credit This credit is calculated based on $2,000 per child under the age of 18 at the lowest personal tax rate and results in a credit of $300 per child. Canada employment tax credit You calculate this credit based on $1,000 at the lowest personal tax rate and the result is a credit of $150 for 2007. Public transit tax credit This credit has been enhanced to include weekly passes purchased four weeks in a row and electronic fare cards used for at least 32 one-way trips a month. You can claim this credit for passes you purchased for yourself, your spouse or common-law partner or dependent children under 19 years of age. Pension income credit, the amount eligible for the federal pension income credit was increased to $2,000 from $1,000 beginning in the 2006 taxation year. And while you’re thinking taxes, remember to consider the potential impact of the new pension income-splitting provisions. For some retired couples, pension income splitting could mean significant tax savings. The age limit for maturing RRSPs has also been increased from 69 to 71, offering a couple of unique tax saving opportunities for seniors. Your professional advisor can help answer any questions you may have questions about any of these changes and how they could affect you. |